Case Number: KC066276 Hearing Date: May 09, 2016 Dept: J

Re: USA Waste of California, Inc., etc. v. City of Irwindale, etc., et al. (KC066276 r/t KC066049)

MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, SUMMARY ADJUDICATION OF ISSUES AGAINST USA WASTE OF CALIFORNIA, INC.

Moving Party: Defendant Dispatch Transportation, LLC

Respondent: Plaintiff USA Waste of California, Inc.

POS: Moving OK; Opposing OK; Reply OK (continued from 3/29/16)

This case arises from a dispute involving the filling of the Arrow Pit, a former open pit sand and gravel quarry consisting of approximately 65 acres of undeveloped land in the City of Irwindale. The Complaint, filed on 8/26/13, asserts causes of action for:

1. Declaratory Relief [v. City of Irwindale]
2. Declaratory Relief [v. City of Irwindale]
3. Declaratory Relief [v. Irwindale Partners]
4. Breach of Written Contract [v. City of Irwindale]
5. Intentional Interference with Contractual Relations [v. Defendant Dispatch and Does 1 through 50]
6. Unfair Competition [v. Defendant Dispatch and Does 1 through 50]

On 10/15/13, this case was deemed related to case number KC066049, Irwindale Partners, L.P. v. USA Waste of California, et al.

A jury trial is set for 8/30/16.

MOTION FOR SUMMARY JUDGMENT/ADJUDICATION:

Defendant Dispatch Transportation, LLC (“Dispatch” or “Defendant”) moves for summary judgment or summary adjudication on the two causes of action asserted against Dispatch in Plaintiff USA Waste, Inc.’s (“USA Waste” or “Plaintiff”) First Amended Complaint (“FAC”) – the fifth cause of action for intentional interference with contractual relations and the sixth cause of action for unfair competition. The motion is made on the following grounds:

1. The fifth cause of action for intentional interference with contractual relations has no merit as a matter of law because: (1) the contractual rights USA Waste contends Dispatch interfered with are unenforceable under the Sherman Antitrust Act; (2) USA Waste lacks standing to sue; and (3) Dispatch did not induce any breach by Defendant City of Irwindale (the “City”) or disrupt the contractual relationship between USA Waste and the City.

2. The sixth cause of action for violation of the Unfair Competition Law (“UCL”) has no merit as a matter of law because: (1) the asserted UCL claims derive from the same facts constituting the alleged intentional interference with contractual relations in the fifth cause of action; (2) the contractual rights USA Waste contends Dispatch interfered with are unenforceable under the Sherman Antitrust Act; (3) USA Waste lacks standing to sue; (4) Dispatch did not induce any breach by the City or disrupt the contractual relationship between USA Waste and the City; and (5) USA Waste did not allege, and has no evidence supporting, a UCL claim under the “unfair” prong, which requires conduct that violates antitrust law or threatens or harms competition.

PLAINTIFF’S EVIDENTIARY OBJECTIONS:

Declaration of William Kwok Tam:

1-14. Overruled
15-16. Sustained
17. Overruled
18-20. Sustained
21-22. Overruled
23. Sustained
24. Overruled
25-27. Sustained
28. Sustained as to the second sentence.
29-30. Overruled

Declaration of William F. Capps:

31-33. Overruled

A defendant moving for summary judgment must “show” that either one or more elements of the “cause of action … cannot be established,” or that there is a complete defense to that cause of action. (CCP § 437c(p)(2).) This means that where the plaintiff has the burden of proof at trial by a preponderance of evidence, the defendant “must present evidence that would require a reasonable trier of fact not to find any underlying material fact more likely than not—otherwise, he would not be entitled to judgment as a matter of law, but would have to present his evidence to a trier of fact.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal4th 826, 851.) Once defendants meet this burden, the burden shifts to the plaintiff to prove the existence of a triable issue of fact regarding that element of its cause of action or that defense. If the plaintiff is unable to do so, defendants are entitled to judgment as a matter of law. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 780-781.)

SHERMAN ANTI-TRUST ACT:

Defendant contends that the Priority Fill Provisions as enforced by USA Waste are unenforceable under the Sherman Antitrust Act and that this unenforceability vitiates the interference claims. USA Waste, in opposition, contends that the Priority Fill Provisions do not violate the Sherman Act because they are not a per se violation of the Sherman Act, they have many “redeeming virtues,” and that they qualify under the State Immunity Doctrine.

Section 1 of the Sherman Act states: “Every contract… in restraint of trade or commerce among the several States… is declared to be illegal.” (15 USC § 1.) Although the Sherman Act, by its terms, prohibits every agreement “in restraint of trade,” Congress intended to outlaw only unreasonable restraints. (State Oil Co. v. Khan (1997) 522 U.S. 3, 10.) Most antitrust claims are analyzed under the “rule of reason,” according to which the finder of fact must decide whether the questioned practice imposes an unreasonable restraint on competition, taking into account a variety of factors, including specific information about the relevant business, its condition before and after the restraint was imposed, and the restraint’s history, nature, and effect. (Ibid.)

However, there are certain agreements or practices which, because of their pernicious effect on competition and lack of any redeeming virtue, are conclusively presumed to be unreasonable and therefore illegal under this section without elaborate inquiry as to the precise harm they have caused or any business excuse for their use. (Northern Pac. Ry. Co. v. U.S. (1958) 356 U.S. 1, 5.) “Per se liability,” under Sherman Act § 1 is reserved for only those agreements that are so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality. (Texaco Inc. v. Dagher (2006) 547 U.S. 1, 5.) Thus, the courts have expressed reluctance to adopt per se rules with regard to “restraints imposed in the context of business relationships where the economic impact of certain practices is not immediately obvious.” (FTC v. Indiana Federation of Dentists (1986) 476 U.S. 447, 458-459.)

Under the state immunity doctrine created in Parker v. Brown (1943) 317 U.S. 341, a local governmental entity may restrict trade without violating the antitrust laws if the state has “clearly articulated” its intention to allow the municipality to replace competition with regulation or monopoly power. (City of Columbia v. Omni Outdoor Advertising (1991) 499 U.S. 365, 372.) To meet the “clearly articulated” requirement it is not necessary for the state to expressly permit the displacement of competition; instead, it is only required that “suppression of competition is the foreseeable result of what the statute authorizes.” (Id. at 372–73.)

Section 4 of the Settlement Agreement states, in pertinent part:

Prioritization of Filling Activities: The parties agree that the City shall prioritize and require the refilling of the quarries in the City in the following order: United Quarry 1, then United Quarry 2… The City agrees that it will not enter into an agreement with any other operator that prioritizes filling obligations of such operator ahead of United’s Quarry 1. Notwithstanding the foregoing, nothing herein shall prevent the City from filling its own quarries using fill that would not otherwise be reasonably available to United. Additionally, nothing herein shall prohibit the City from approving the filling of any privately operated quarry in the City, provided such quarry(ies) use fill that would not otherwise be reasonably available to United. (DSS ¶ 5: Tam Decl. ¶ 4, Exh. A, Page 5.)

Defendant contends that the Priority Fill Provisions are per se violations because they represent a concerted refusal to deal with others. The court disagrees. There is nothing in the Priority Fill Provisions on its face or in practice would act as a refusal to do business with a particular private or public company. Rather, it appears that the purpose of the Priority Fill Provisions was to provide priority filling to the Arrow Pit. (See Motion, Tam Decl. ¶ 8.) Plaintiff also submits evidence that the City has not received any complaints about the Priority Fill Provisions since October 2007 (PSS ¶ A15: USA Index, Exh. 3 [Tam Depo. 162:20-163:4]); and that there are a number of landfills that accept fill material in close proximity to the City where operators can deposit fill material (PSS ¶ A32: USA Index, Exh. 21 [Pugmire Depo. 132:14-20, 186:10-14]). The fact that the provision may have had an anticompetitive effect on other quarry owners and operators does not make the provision per se violations. Further, Defendant’s claim that the Priority Fill provisions prohibited the City of Irwindale from entering into agreements with other landfill operators is contradicted by declarations provided in support of Defendant’s motion. Specifically, the Declaration of William Kwok Tam, identifies two Development agreements entered into between the City of Irwindale and private operators: the “Hanson Agreement” and “Vulcan Agreement.” (Tam Decl. ¶ 11A-B.)

Plaintiff, in opposition, also submits evidence raising triable issues as to whether there are “redeeming virtues” that outweigh any restraint on trade (See PSS ¶¶ A10-A11: USA Index, Exhs. 17 [City of Irwindale’s General Plan, June 2008] and 18 [City of Irwindale, Economic Strategic Plan FY2011-12-2015]), and/or whether the state immunity doctrine is applicable in this action (See PSS ¶¶ A13-A16: USA Index, Exh. 3 [Tam Depo. 143:1-15, 158:6-12, 162:20-163:4, 146:17-20, 155:15-24165:22-166:20] and Exh. 19 [City of Irwindale, Community Redevelopment Agency 2010-2014 Five-Year Redevelopment Implementation Plan]).

Further, it appears that the cases cited in Defendant’s motion, which concern illegal price fixing and/or exclusive service contracts for a county, are distinguishable from the facts of this case. (See Broadcast Music, Inc. v. Columbia Broadcasting System, Inc. (1979) 441 U.S. 1, 19-20 – Television network brought an antitrust suit against licensing agencies for composers, writers and publishers and their members and affiliates, alleging that the system by which the agencies received fees for the issuance of blanket licenses to perform copyrighted musical compositions amounted to illegal price fixing; see also A-1 Ambulance Services, Inc. County of Monterey (1996) 90 F. 3d 333 – Ambulance service brought an action against the county and city seeking an injunction against the county’s request that ambulance services submit proposals to provide service to an exclusive operating area, challenging the county’s uniform rates as breach of a constitutional obligation to compensate for services, and challenging the city’s use of emergency equipment without payment as unconstitutional taking.)

The motion for summary judgment, and/or summary adjudication on this ground is denied.

STANDING:

Generally, the real party in interest is the person who has the right to sue under the substantive law. It is the person who owns or holds title to the claim or property involved, as opposed to others who may be interested or benefited by the litigation. (Gantman v. United Pac. Ins. Co. (1991) 232 Cal.App.3d 1560, 1566.) When a party lacks standing to sue, the action must be dismissed, unless the complaint can be amended by substituting a party who has standing. (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 1004-1011.)

Whenever one operator succeeds to the interest of another in any incomplete surface mining operation by sale, assignment, transfer, conveyance, exchange, or other means, the successor shall be bound by the provisions of the approved reclamation plan and the provisions of this chapter. (Cal Pub Res C §2779.)

Defendant contends that USA Waste is not a party to the Settlement Agreement or SMARA Transfer Agreement and thus, does not have standing and the right to sue for Dispatch’s alleged interference with the Priority Fill provisions based on USA Waste’s rights as an assignee of United Rock or its transferee, Irwindale Partners.

Defendant submits evidence that the lease, pursuant to which USA Waste took possession of an agreement to operate the Arrow Pit, does not contain an express assignment by Irwindale Partners to USA Waste of the Priority Fill Provisions or of the right to sue for a breach thereof. (DSS ¶¶ 12-13: Johnson Decl., ¶ 2, Index, Exh. G.)

USA Waste, in opposition, contends that it has standing to sue because USA Waste has both an actual and substantial interest in the enforcement of the Priority Fill Provisions. USA Waste submits the following evidence:

JH Properties, Inc. entered into a purchase and sale agreement with United Rock for the purchase of the Arrow Pit in December 2004, and assigned the rights and obligations of the purchase and sale agreement of JH Properties, Inc. to Irwindale Partners, LP. (PSS ¶ A19: USA Waste Index, Exh. 9 [Yellen Decl. ¶ 2], Exh. 10 [Yellen Deop. 19:2-20:8], Exh. 12 [United Rock Responses to Form Interr., p. 12:3-7], and Exh. 36 [Baker Decl. ¶ 2].) Before the sale and lease of the Arrow Pit, the City provided an opinion letter to USA Waste and Irwindale Partners regarding the governing entitlements applicable to the reclamation of the Arrow Pit. (PSS ¶ A20: USA Waste Index, Exh. 13 [November 8, 2004 letter from City to USA Waste].) The City’s opinion letter to Irwindale Partners and USA Waste confirmed that the entitlements containing to the operational requirements to reclaim the Arrow Pit were limited to: (1) The Reclamation Plan; (2) SMARA Operations Rights Transfer and Conveyance Agreement; (3) specified bonds for financial assurances; and (4) the Standstill Agreement. (PSS ¶ A21: USA Waste Index, Exh. 13 [November 8, 2004 letter from City to USA Waste].) As part of its purchase of the Arrow pit, the City required Irwindale Partners to assume the obligations in the Reclamation Plan, Standstill Agreement, and other entitlements governing the Arrow Pit. (PSS ¶ A22: USA Waste Index, Exh. 9 [Yellen Decl. ¶ 2] and Exh. 14 [Assignment of Rights and Liabilities].)

In November 2004, USA Waste entered into a lease agreement with Irwindale Partners to operate the Arrow Pit (“Lease”), and both the Settlement Agreement and SMARA Transfer Agreement were attached and incorporated as exhibits in the Lease. (PSS ¶ A23: USA Waste Index, Exh. 8 [Lease Agreement].) USA Waste took possession of the Arrow Pit in December 2004 and conducted reclamation operations until November 30, 2014. (PSS ¶ A24: USA Waste Index, Exh. 3 [Tam Depo. 19:11-18], Exh. 8 [Lease Agreement], and Exh. 15 [De Frates Decl. ¶¶ 4-5].)

USA Waste succeeded to United Rock’s vested rights and obligations pertaining to the reclamation of Pit No. 1 pursuant to the governing entitlements and Pub. Res. Code § 2779. (PSS ¶ A25: USA Waste Index, Exh. 4 [City Resp. to RFA Set Two, p. 3:12-4-7], Exh. 5 [City’s Resp. to Second Set of Rogs, p. 3:21-26].)

The evidence submitted by USA Waste raises a triable issue of fact as to USA Waste’s standing to bring this action. The motion for summary judgment, or in the alternative, summary adjudication based on standing is denied.

FIFTH CAUSE OF ACTION FOR INTENTIONAL INTERFRENCE WITH CONTRACT:

To prevail on a claim for intentional interference with contractual relations, a plaintiff must show: (1) an enforceable contract between the plaintiff and a third party; (2) defendant’s knowledge of the existence of that contract; (3) defendant’s intentional acts or conduct, designed to induce a breach or interruption of the contractual relationship; (4) an actual breach or disruption of the contractual relationship; and (5) resulting damage. (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1148.)

Defendant contends that USA Waste cannot show that Dispatch had the requisite intent to interfere. Defendant submits evidence that all of the acts by Dispatch were fully consistent with the City’s own interpretation of the Priority Fill Provisions. (DSS ¶¶ 16-20, Tam Decl. ¶¶ 6, 9-11.)

USA Waste, in opposition, contends that the language contained in the License Agreement demonstrates that Dispatch intentionally violated the terms of the Priority Fill Provisions and interfered with USA Waste’s contract. USA Waste also submits the following evidence:

The License Agreement between Dispatch and the City provides that Dispatch “shall not conduct a commercial fill operation that would violate the Prioritization Clause and that it will only use fill not reasonably available to a priority quarry.” (PSS ¶ A26, USA Waste Index, Exh. 16 [License Agreement].) The License Agreement further states that the “pit which is currently a priority pit under the Prioritization Clause is [the Arrow Pit], which since its conveyance to JH Partners [sic] is sometimes referred to as the JH Pit. The owner, JH [sic], has leased the pit to Waste USA [sic] to conduct fill operations.” (Ibid.)

While the City believes that if the materials deposited at the Manning Pit are “not commercially available,” then there is no violation of the Priority Fill Provisions, the City does not know what “not commercially available means.” (PSS ¶ A29: USA Waste Index, Exh. 3 [Tam Depo. 149:3-10, 168:10-21].)

Dispatch’s operation at the Manning Pit is a commercial fill operation as they charge customers a fee to “dump” material at the Manning Pit. (PSS ¶ A30: USA Waste Index, Exh. 17 [Dispatch’s Response Nos. DISP051686, DISP051689, DISP051703, DISP05228, DISP052593].)

The City has not made any inquiries regarding the materials being placed at the Manning Pit to ensure compliance with the Priority Fill provisions or the License. The City believes it is Dispatch’s responsibility to ensure compliance with the Priority Fill Provisions and the License and relies solely on Dispatch to ensure compliance. (PSS ¶ A31: USA Waste Index, Exh. 3 [Tam Dpeo. 149:3-10, 183:5-23].)

The evidence submitted by USA Waste creates a triable issue of fact as to whether acts by Dispatch were fully consistent with the City’s own interpretation of the Priority Fill Provisions. The motion for summary adjudication of the fifth cause of action is denied.

SIXTH CAUSE OF ACTION FOR UNFAIR COMPETITION LAW:

California’s statutory Unfair Competition Law prohibits, and provides civil remedies for, “unfair competition,” defined as “any unlawful, unfair or fraudulent business act or practice.” (Bus & Prof C § 17200.)

Defendant moves for summary judgment or, alternatively, summary adjudication on the grounds that the UCL claims lacks merit based on the same grounds as above. On the basis of the evidence discussed above, the motion for summary adjudication of the sixth cause of action is denied.

MOTION FOR SUMMARY JUDGMENT:

Based upon the foregoing, the motion for summary judgment is also denied.